• December
  • 3 min read

Timeshare Financing Options: Risky Business?

Timeshare Financing Options

Confused about timeshare financing? It’s more complicated than you think.

In timeshare sales presentations, you’ll hear a lot of talk about how awesome timeshares are. Beautiful resorts. Easy, reliable vacations. Living your best life. But your sales rep might not spend quite as much time talking about the elephant in the room: paying for the timeshare. How do people pay for timeshares? Let’s look at the options and risks of timeshare financing.

Developer Financing

Most of us don’t have the $22,180 average cost of a timeshare on hand. That’s where timeshare financing comes in. The most common form of timeshare financing is developer financing. In this case, the developer essentially loans you the cost of the timeshare and that you pay back over time with interest. Although this may seem like the most convenient choice when you’re in the middle of a timeshare sales presentation, you’ll see hefty interest rates ranging from 12-20% that may get decidedly inconvenient over time.

If you fall behind on your payments, which is not at all uncommon, your access to your timeshare may be restricted. So, even if you’ve paid a substantial amount toward your balance, you’ll be unable to enjoy the benefits. And the same energy the resort put into selling you your timeshare will be put into collecting payments from you. Expect collection letters and calls plus negative reporting to the major credit bureaus.

Personal Loans

If the high interest rates of developer loans seem like too much, you can consider an unsecured personal loan. In this case, “unsecured” means that the loan is not backed by anything of value, such as a car or house. This type of loan will have a higher interest rate than a secured loan because if you fail to pay, your lender can’t recoup their losses by taking your car or house. That should probably be a red flag right there: the timeshare you’re about to buy has no intrinsic value as far as lenders are concerned. However, personal loans usually have much lower interest rates than developer loans. And if you go through a reputable lender, you may get better terms than a developer would give you.

Credit Cards

You may not qualify for a personal loan and find yourself considering putting your timeshare on a credit card. Credit card interest rates are usually higher than a developer loan. But some cards offer no-interest introductory rates, so if you can pay off the timeshare within that window, this would be a no-interest way to pay. However, the fine print in your credit card contract may state that a missed payment results in an interest rate hike, and that will be very expensive indeed. Putting your timeshare on a credit card is risky.

Home Equity Loans

Some consumers choose to take out home equity loans to pay for timeshares. Because home equity loans are secured by your primary residence, interest rates are much better. However, you put your home at risk if you are unable to make your payments. Is an “investment in vacation” worth the risk of losing your home? And if you’re wondering if you can get a separate mortgage for your timeshare, the answer is decidedly no. Again, lenders don’t view a timeshare loan as a secured loan. The risks to them are high, so your interest rates will be similarly high.

Write A Check

By now you’re probably thinking that timeshare financing isn’t a great option. Why not just pay up front? Well, paying for your timeshare up front does save you interest payments. However, you need to consider the better uses of that money. Right now, that money is at a minimum in a savings account somewhere, quietly earning interest for you. Even better, it’s invested somewhere savvy, actively and awesomely earning interest for you.

So, why move your money into a timeshare? Your sales rep may lead you to believe that putting that money into a timeshare is an equally good investment. However, even the ARDA will admit that a timeshare isn’t a financial investment. They often call it an investment in vacation or a vacation lifestyle. A financial investment earns money over time. But a timeshare does no such thing. In fact, the value of your timeshare decreases pretty much as soon as the ink on your contract is dry. So instead of earning even the modest interest in a savings account, your money will go to a concept that you can’t resell and that in fact will continue to cost you money in the form of maintenance fees over time. So, think twice before your turn over your life savings to any timeshare company.

As you can see, all timeshare financing options come with real risks. And we see the results of these risks every day. Many of our clients come to us with damaged credit and in danger of losing their homes because of timeshare payments. If that’s you and you’re ready to get out of the timeshare trap, contact us for a free consultation today.

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